Yes, you can technically sell a car for $1. This is a common legal strategy, often used when transferring a vehicle to a family member to minimize the sales tax the new owner will pay, as tax is usually calculated based on the sale price. However, there are significant legal and financial implications to consider. The IRS may view this as a gift, and gift tax rules could apply if the vehicle's value exceeds the annual gift tax exclusion amount (which is $18,000 for 2024). Furthermore, the state's Department of Motor Vehicles (DMV) often has a minimum taxable value, meaning they will charge sales tax based on the car's fair market value, not your $1 sale price, which defeats the purpose.
The process itself is straightforward: you and the buyer fill out the title, stating the sale price as $1, and sign it. You must also complete a bill of sale for documentation. However, you must be aware of the downsides. If you have an outstanding auto loan, the lender will not release the title until it's paid off, making a $1 sale impossible. Also, if the car is later involved in an accident or accrues parking tickets before the new owner officially registers it, you could be held liable.
| Consideration | Key Implication | Why It Matters |
|---|
| State Sales Tax | DMV will likely assess tax on the car's fair market value. | The buyer might face a large, unexpected tax bill, negating any intended savings. |
| IRS Gift Tax | Selling for far below market value is considered a gift. | If the car's value is high, you may need to file a gift tax return. |
| Loan Payoff | You cannot transfer a title with an active lien. | The loan must be paid in full before the sale can proceed. |
| Seller Liability | Liability may not transfer until the DMV processes the paperwork. | You could be responsible for tickets or accidents during the transition period. |
| Future Warranty | A "as-is" $1 sale voids any remaining factory warranty. | The buyer accepts the car with absolutely no guarantees. |
Ultimately, while legal, a $1 sale is best suited for straightforward transfers between immediate family members where both parties understand the risks. For any other situation, it's safer to sell the car for its fair market value.
